Asset finance and commercial mortgages on the up

A growth in business credit demand in the June quarter, boosted by a surge in asset finance applications, signifies a “positive outlook for business”, according to Equifax.

The consumer credit and analytics company recently revealed its Quarterly Business Credit Demand Index, which found that the level of business loan, trade credit, and asset finance applications rose at an annual rate of 2.7 per cent in the June quarter, compared to the same period last year.

The data, which collated the volume of credit applications that went through the Commercial Bureau from financial institutions and major corporations in Australia, found that while business loan applications were "moderate" at 1.9 per cent growth, asset finance performed strongly.

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Indeed, applications for finance to support equipment and assets rose by 6.5 per cent in the June quarter on the prior year. This growth, according to Neil Shilbury, general manager for commercial and property products at Equifax, reflected the strong conditions in NSW, Victoria and SA.

Speaking to Mortgage Business, Mr Shilbury said: “Why we have a significant increase in asset finance relative to the rest of the index. There seems to be quite a high growth, particularly in NSW and VIC, SA, and obviously the economy there is better than overall over the recent period.”

He added: “NSW itself has a large amount of transport infrastructure work underway, and commercial construction is also very healthy.

“Victoria has invested in a large amount of transport infrastructure, with the strongest population growth underpinning a broader economic growth as well.”

By asset finance account type, applications for auto loans rose the most (by 10.8 per cent), followed by leasing (9.1 per cent), commercial rental (5.2 per cent), and hire purchase (2.7 per cent). Bill of sale applications dropped by just under 9 per cent.

As well as asset finance, commercial mortgage applications also grew markedly — rising by nearly a quarter (23.1 per cent). However, this marked a slight easing on the March quarter (when applications were at 25.7 per cent).

Mr Shilbury said: “We saw the same lift last quarter as well, and it covers investment such as businesses buying new premises and also encompasses property developers buying property for redevelopment.

“Obviously, we've seen strong growth in the Australian market in property development . . . and with favourable interest rates and the growth we've seen in apartment developments, a lot of that is underpinning that growth overall.

“It indicates that despite the efforts of the regulator in acknowledging the churn that the banks (particularly) have been able to lend to property investors, there continues to be demand. . . . The market is holding up well despite those changes.”

The rise in commercial mortgage applications lifted the growth in business loan applications by 1.9 per cent on last year.

Overall, Mr Shilbury said that the index shows that “much of the pain from falling mining investment is passing, helped along by improved conditions in China, which have boosted the Australian economy”.

He concluded: “Over the past several months, we have seen stronger company profits, low interest rates, and solid levels of business confidence nationally. In this context, the pick-up in business credit growth seen in the most recent index is consistent with the better business conditions that have emerged in the first half of 2017.”